Understanding, calculating and using costs > Allocating cost for best practice injury management

Cost centres

Allocating costs to specific departments or other relevant cost centres allows the organisation to track problems and trends. Ideally costs should be tracked to the supervisor level, because the supervisor or line manager plays a very important role in determining whether return to work outcomes are positive or negative.

When costs are allocated to a central budget there is little incentive for managers to be active players in return to work. Some organisations vary cost allocation. An example of this is when the first five claims impact the cost centre budget but anything over that is paid centrally.

As is the case with wage replacements, the point is to use cost centre allocation to promote safe and speedy return to work for injured or ill employees. The table below shows how cost allocation can act as either an incentive or disincentive for best practice injury management.

Costs allocated to a central budget

Costs allocated to relevant cost centre

A government health organisation's premiums are paid through the 'head office' or department budget.

The cost impact of any claim is paid for by head office.

An employee returning to work on modified duties who is 50% productive receives normal wages for hours worked. This is paid by the workplace.

The workplace is under pressure with staffing levels and budgets. Budget-wise, it is more sensible if the supervisor encourages the injured employee to remain off work and employs an able-bodied person in their place.

The regional area of a government health organisation allocates all costs to the workplace where the injury occurred.

The cost impact of any claim is paid by the workplace.

An employee returning to work is paid for by the site. An employee on modified duties who is 50% productive receives normal wages for the hours worked, paid for by the workplace.

If the employee remains off work the costs of the WorkCover premium, which is often higher than normal wages, is paid for by the workplace. The workplace has an incentive to do whatever is needed to return the employee to the workplace.